Tag: idbi bank

Most merchant bankers indicate 52 weeks’ time, BFSI News, ET BFSI

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Most of the merchant bankers who had submitted bids for facilitating strategic sale of LIC-controlled IDBI Bank indicated a time-frame of one year to complete the elaborate process, sources said.

During a presentation before the Department of Investment and Public Asset Management (DIPAM) held recently, most of the eligible transaction advisers gave a time-frame of 50-52 weeks to undertake several stages of the privatisation process of IDBI Bank, market sources said.

However, the government intends to complete the transaction during the current fiscal itself. Thus the merchant banker has to find a buyer in about 26 weeks or six months.

According to market sources, as many as seven bids — Deloitte Touche Tohmatsu India LLP, Ernst and Young LLP, ICICI Securities Ltd, JM Financial Ltd, KPMG, RBSA Capital Advisors LLP and SBI Capital Markets Ltd — were received.

DIPAM on behalf of Government of India had floated a tender in June inviting bids from transaction advisors from reputed professional consulting firms or investment bankers or merchant bankers or financial institutions for facilitating and assisting strategic disinvestment of IDBI Bank. The last date for submission of bids was July 13.

KPMG placed the lowest bid of Re 1, and was selected as the transaction adviser, market sources said, adding, the firm will assist the government in the sale for Re 1.

The Cabinet had in May given in-principle approval for IDBI Bank’s strategic disinvestment along with transfer of management control.

The central government and LIC together own more than 94 per cent equity of IDBI Bank. LIC, currently having management control, has 49.24 per cent stake, while the government holds 45.48 per cent. Non-promoter shareholding stands at 5.29 per cent.

The transaction advisor would be required to advise and assist the government on modalities of disinvestment and the timing; recommend the need for other intermediaries required for the process of sale/disinvestment and also help in identification and selection of the same with proper Terms of Reference.

The transaction advisor will also assist in preparation of all documents like Preliminary Information Memorandum (PIM), organise roadshows to generate interest among the prospective buyers and suggest measures to fetch optimum value.

The advisor would also be supporting IDBI Bank in setting up an e-data room and assisting in the smooth conduct of the due diligence process.

As per the eligibility criteria outlined in the RFP, the bidders should have advised at least one transaction of strategic disinvestment/strategic sale/M&A activities/private equity investment transaction of the size of Rs 5,000 crore or more during the period from April 2016 to March 2021.

The extent of shareholding to be divested by the central government and LIC shall be decided at the time of structuring of transaction in consultation with the RBI, the government had earlier said.

Insurance giant LIC had acquired controlling stake in IDBI Bank in January 2019.

Finance minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal.

The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation. Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs 75,000 crore through CPSE disinvestment receipts.



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Retail banking a growth story whose potential hasn’t been unearthed fully: IDBI Bank

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IDBI Bank is readying an “API (Application Programming Interface)-Banking” platform that will act as a bridge between third party entities such as account aggregators, payment service providers and fintechs, and its core banking solution platform to create a connected ecosystem, enhance customer experience and open up new revenue streams, according to Suresh Khatanhar, Deputy Managing Director (DMD).

In an interaction with BusinessLine, Khatanhar emphasised that retail banking is a growth story whose potential has not been unearthed fully. Excerpts:

Now that you are out of the prompt corrective action (PCA), will your bank re-balance its advances portfolio?

We came into difficulty because of the high provisioning arising from the Asset Quality Review (AQR) exercise (initiated by the Reserve Bank of India for banks in 2015). This had an impact on our capital. We had a little extra problem because of our Development Finance Institution (DFI) status in the past, whereby we had chunky exposure to infrastructure and core sectors. We addressed this by taking a few measures. Firstly, by de-risking the loan portfolio. Secondly, we revisited our risk management policies. Thirdly, we worked on the risk appetite framework, whereby we adopted a capital light business, so that we are future-ready.

Tumultuous journey of a development bank

Actually, during the PCA period (from early May 2017 till early March 2021), we could deep-dive into our process, products, risk management policies and also re-balance the portfolio. We were skewed in favour of corporate banking, where the risk is concentrated. Though we were not allowed to lend to corporates under PCA, we saw in it an opportunity to grow retail advances. So, our corporate to retail loans ratio is today at 38:62 (57:43 when PCA was imposed).

The portfolio composition shift happened because we were not doing corporate loans. But now that we have started doing corporate loans, this ratio, in all probability, will shift. But then this year, I don’t think retail advances go below 60 per cent (of total advances). We have decided that we will not go below 55 per cent in retail.

IDBI Bank net profit soars 318% to ₹603 crore in Q1 FY22

And then we had a lot of high-cost borrowing. Bulk term deposits were at about 36 per cent of total deposits. This has come down to about 8 per cent. Our CASA (current account, savings account) was about 32 per cent of total deposits. This is now at 52 per cent. So, this has helped us to improve our cost of funds and cost of deposits.

We would like to further consolidate and strengthen our balance sheet, which we have been doing for the last two-three years, and grow. It is now time to grow the loan book from here on.

Stress seems to be building up in banks’ retail portfolio. Isn’t retail lending becoming a bit risky?

Having decided to become a retail bank, we put in place a reorganised structure…And today, we have separate verticals for structured retail assets, micro, small and medium enterprises, agriculture, and recovery as well as collection. We have separate processing centres. We have centralised operations. All these are very progressive steps, ensuring that risk is properly addressed…So, this way our operations have been segregated. And more importantly, this business model is a scalable one because retail is a volume game.

The retail banking story is a growth story. I don’t think the potential has been unearthed fully. It is a growing market. Today, the service sector is growing. People working in the sector want car loan, housing loan, personal loan, place deposits, make investments, and want various services…So, retail banking has the potential to grow.

Now in such a severe pandemic, which comes once in a century, anything under the sun can come under stress.

Our bank’s retail portfolio composition is a little different from other banks. We are not into unsecured loans and 93 per cent of our retail loan book is mortgage book, which is secured. Ninety per cent of the borrowers are salaried employees with credit score of above 700. While stress is there because of the pandemic, given this kind of borrower composition, revival is very much possible and easy. And today, even after the second wave of Covid, our collection efficiency is at pre-Covid level, which is 94-94.5 per cent….So, our retail banking model is well set and we have a committed sales force.

You mentioned being future-ready. Can you throw some light on this?

As soon as economic activity improves further, we would like to do more business, give more services to our customers…But simultaneously, our focus this year will be on digital penetration. We are working on various digital products. So, having made our balance sheet strong and robust, we would also like to make our infrastructure robust.

Now our API-Banking is also getting ready. This will help us integrate lot many apps so that we can onboard many fintechs, going forward.

API-banking will be integrated with our core banking solution platform. This will enable us to connect a lot of applications for cross-selling third party products, paying utility bills and credit card issuance, among others.

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UCO Bank out of PCA, will RBI blink in case of IOB, Central Bank?, BFSI News, ET BFSI

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The Reserve Bank of India (RBI) has removed UCO Bank from its Prompt Corrective Action Framework (PCAF) but the fate of Central Bank and Indian Overseas Bank hangs in balance.

The central bank lifted the PCA on Uco Bank following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital.

However, RBI had reservations over the capital adequacy levels of the banks under PCA.

Interestingly, Indian Overseas Bank and Central Bank were reported to be among the four banks shortlisted by the government for privatisation.

The RBI objection

In FY21, the government infused Rs 20,000 crore in ve banks through the instruments. Central Bank of India was the biggest beneficiary with Rs 4,800 crore, followed by Indian Overseas (Rs 4,100 crore), UCO Bank (Rs 2,600 crore).

However, the RBI had raised questions over the government’s bank capital infusion programme through non-interest-bearing bonds, according to a report.

The RBI reasoned that capital infusion through bonds cannot be taken at face value and, therefore, these banks may still be short of regulatory capital, they said. In such a situation, they will continue under the PCA framework. Under the PCA regime, business restraints are imposed on struggling banks until they regain health.

The government went ahead despite RBI’s initial reservations and now the regulator had expressed serious concerns. The entire fund infusion through such bonds will then not count toward regulatory capital.

RBI is not inclined to pull these lenders out of the PCA framework based on such capital infusion and may further direct lenders to recalculate their capital adequacy ratio based on the actual value of the bonds.

The PCA status

Indian Overseas Bank, Central Bank have reported net non-performing assets (NPAs) below levels that trigger PCA. However, on the proforma net NPA front, Central Bank falls short as its NNPA is 6.58% against the 6% required to be out of PCA.

Even after PCA exit, these banks may still be under RBI watch. In the case of IDBI Bank, which has committed to comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis, RBI has said the lender would be under continuous monitoring. “It has been decided that IDBI Bank be taken out of PCA framework, subject to certain conditions and continuous monitoring,” RBI had said.

Privatisation bid

Four banks on the privatisation shortlist included Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India.

Two public sector banks and one general insurance company are expected to be disinvested this year in addition to the divestment of IDBI Bank, Finance Minister Nirmala Sitharaman had announced during the Union Budget presentation.

Bringing the banks out of PCA could boost their valuations in the event of privatisation.



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IDBI Bank-led consortium seeks EoIs to sell exposure to IVRCL road asset

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In Q1FY22, IDBI Bank reported a 318% year-on-year jump in its net profit, aided by a recovery from the Kingfisher Airlines account.

A consortium of lenders led by IDBI Bank on Monday sought expressions of interest for acquiring its Rs 804-crore exposure in a road asset developed by IVRCL. The banks wish to sell IVRCL Chengapalli Tollways (ICTL) to asset reconstruction companies or other financial institutions in line with regulatory guidelines.

IVRCL was among the companies named by the Reserve Bank of India (RBI) in 2017 in its second list of bad assets to be resolved under the insolvency code. The company has since gone into liquidation. The road asset is being offered at a reserve price of `500 crore in an all-cash deal, implying a maximum haircut of 38%. The consortium has sanctioned loans worth Rs 862 crore to the asset. The other lenders in the consortium are Karur Vysya Bank, Union Bank of India, State Bank of India and Bank of Baroda.

Bidders interested in buying the asset will have to send in expressions of interest (EoIs) by September 9 and the last date for submission of bids is September 27. Thereafter, there will be an inter-se bidding among the top three bidders on September 28. “Once the deal is finalised, the assignment deed and other legal formalities will be completed in the shortest possible time as mutually agreed upon,” IDBI Bank said in a notice.

Recoveries from large bad assets have been an important factor behind some banks turning a profit in the June quarter. In Q1FY22, IDBI Bank reported a 318% year-on-year jump in its net profit, aided by a recovery from the Kingfisher Airlines account. The total recovery from the account stood at Rs 733 crore.

IDBI Bank MD & CEO Rakesh Sharma said in July that the bank will be able to reduce its gross non-performing asset (NPA) ratio by 4-5% through growth in the advances or the denominator. “Now the government has also come out with the National Asset Reconstruction Company Ltd. (NARCL) and we may transfer some accounts there as well. Once the NARCL becomes functional, some assets will be transferred and that would further reduce the gross NPA by another 5-6%,” said Sharma. The gross NPA ratio stood at 22.71% at the end of June.

The lender plans to transfer a total of Rs 11,000-12,000 crore of advances to the NARCL, of which live accounts will be to the tune of Rs 7,000-8,000 crore, with the rest being written-off accounts.

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IDBI Bank board okays divesting entire 19% stake in ARCIL, BFSI News, ET BFSI

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IDBI Bank on Friday said its board has okayed a proposal to divest its entire stake of over 19 per cent in ARCIL. The decision was taken at a meeting of the board of directors on Friday.

The board has approved the proposal for sale of IDBI Bank’s entire holding of 6,23,23,800 fully paid-up equity shares constituting 19.18 per cent of the total equity share capital of Asset Reconstruction Company (India) Ltd (ARCIL), IDBI Bank said in a regulatory filing.

In June this year, IDBI Bank had invited bids from interested parties for the takeover of its stake in the asset reconstruction company.

Incorporated in 2002, ARCIL is owned by SBI, IDBI, ICICI and PNB, besides strategic foreign investors such as Avenue Indian Resurgence Pte Ltd.

Since its inception, ARCIL has resolved over Rs 78,000 crore worth of non-performing assets acquired from domestic banks and financial institutions, as per its website.



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Home loan defaults: Demand, possession, auction notices on the rise as delinquencies climb

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Historically, a home loan is considered the safest variety of credit because there is a security attached to it and most borrowers want to avoid losing their homes.

Demand and possession notices for apartments bought using home loans have been on the rise as delinquencies climb in the segment. Over the last few weeks, banks and non-banking financial companies (NBFCs) alike have sharply increased the volume of homes they repossess and put up for auction.

The notices have been put out by lenders across the public and private sectors, with institutions like IDBI Bank, Union Bank of India, Bandhan Bank, IIFL Home Finance, Tata Capital Housing Finance, Muthoot Housing Finance and Manappuram Home Finance, among others. The recovery amounts fall in the wide range of just under Rs 1 lakh and up to Rs 95 lakh.

“It is true that banks across the industry have become active about making recoveries. There are three processes they are employing – aggressive collections, resolution of the accounts wherever possible, and finally liquidation of whatever stock they have,” said a senior executive with a mid-sized private bank. The trend of recoveries through auctions are likely to continue into the third and fourth quarters of the current year, he added.

A similar trend of auction notices had been observed in the January-March quarter with respect to gold loans. Thereafter, most lenders with a sizeable gold loan portfolio reported a deterioration in asset quality in that segment. Bankers said that the notices work more as a wake-up call for the borrower than as an actual announcement of auctions.

Of course, there are stages to making recoveries through the auction route. The lender first issues a demand notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, seeking repayment of outstanding dues within a stipulated period. If the demand is not met, it then puts out a possession notice and then finally a sale notice. All three kinds of notices now cover entire pages of newspapers.

Historically, a home loan is considered the safest variety of credit because there is a security attached to it and most borrowers want to avoid losing their homes. However, the second wave of the pandemic has dealt a huge blow to some borrowers, causing home loan slippages to rise.

Bankers said that the pain is severest in the self-employed category because their income streams have been affected due to repeated lockdowns and mobility restrictions. Unlike in the first half of FY21, there is no moratorium in the current year and that has caused higher delinquencies. State Bank of India’s (SBI’s) gross non performing asset (NPA) ratio in the home loan segment stood at 1.39% as on June 30, though it improved to 1.14% thereafter.

SBI chairman Dinesh Khara said after the bank’s Q1 results that almost 50% of the bank’s home loan book is to the non-salaried class. “Many of the SME borrowers also would be the ones to avail home loans. I think the essential stress seen in this book is on account of disruption in cash flows for the SMEs,” Khara said.

Analysts expect collection trends to improve in the days ahead. In a recent note, Emkay Global Financial Services said that banks expect some NPAs from the inflated special mention account (SMA) pool to spill over into Q2, while the restructured pool too should inch up. “Collection activity may return to the pre-Covid level in Q3, subject to no severe Covid third wave. Within retail, recovery rates should improve in secured mortgages and gold loans as stress formation in those segments was higher than expected due to impaired mobility, which has normalised now,” Emkay said.

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KPMG to advise govt on IDBI Bank sale, expression of interest in October

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Success in IDBI Bank sale may be indicative of broader investor appetite in state-owned banks with adequate loan-loss reserves.

The government has appointed KPMG India as the transaction adviser for strategic disinvestment of its 45.48% stake in IDBI Bank. It would seek expression of interest (EoI) from potential buyers in October, in line with the plan to complete the transaction in the current financial year, official sources said.

As per the plan, the government will exit the bank by divesting its entire stake worth about Rs 18,500 crore at the current market prices and promoter Life Insurance Corporation will offer to sell a portion of its 49.24% stake with an intent to relinquish management control.

Discussion will soon start with the Reserve Bank of India on the structuring of the transaction in terms of glide path (of the new promoter’s holding), voting rights, etc,” a senior official told FE.

Even though RBI will allow the new promoter of IDBI Bank to hold more than 51%, the promoter has to ultimately bring down its holding to the regulatory limit of 15% (a RBI panel had suggested last year to increase it from 15% to 26% for promoters and from 10% to 15% for non-promoters) in a prescribed time period. Also, the stipulation in the Banking Regulation Act, 1949 is that no shareholder of a banking company – PSB or private sector bank – can exercise voting rights more than 26%.

After a failed attempt a few years ago, the government diluted its stake in IDBI Bank in January 2019 in favour of LIC, which then became the promoter in the bank with 51% stake. Under a special dispensation, the Insurance Regulatory and Development Authority has allowed LIC to hold 51%, against the norm of 15%. The insurer will, however, have to pare its stake to 15% in due course.

Success in IDBI Bank sale may be indicative of broader investor appetite in state-owned banks with adequate loan-loss reserves.

After a gap of five years, IDBI Bank starting making profits in FY21 — it reported a net profit of Rs 1,359 crore in the years. Following improvement in asset quality, the bank exited the prompt corrective action (PCA) framework on March 10. It can resume corporate lending which was stopped after it came under PCA.

The bank reported over 300% jump in its net profit to Rs 603 crore for the June 2021 quarter, aided by higher growth in net interest income (NII) and improvement in asset quality.

Of the Rs 1.75-lakh-crore disinvestment target for FY22, the government has budgeted Rs 1 lakh crore from disinvestment of government stake in public sector financial institutions and banks such as LIC IPO and IDBI Bank strategic sale.

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Siva Industies lenders, slammed NCLT over settlement deal, to move NCLAT, BFSI News, ET BFSI

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The Siva Industries resolution has many a twist left.

After the National Company Law Tribunal rejected the one-time settlement offer made by Siva Industries and ordered that the company will go into liquidation, the lenders are planning to move the appellate tribunal NCLAT.

The NCLT order

The NCLT Chennai Bench, comprising R. Sucharitha and Anil Kumar B., said in the order, “The purported settlement plan proposed by the promoters of the Corporate Debtor is not a Settlement simpliciter, rather it is a ‘Business Restructuring Plan’. As per the plan, there is no final offer made by the promoter of the corporate debtor and also the acceptance made by the CoC in this regard. There is no finality reached between the promoter of the Corporate debtor and the CoC of the Settlement proposal; hence based on ambiguity of the terms of settlement, we cannot order for the withdrawal of CIRP.”

The order also said that seeking liquidation should there be a default was beyond the scope of IBC.

The NCLT said the application made by RCK Vallal, one of the shareholders of the company, is not conforming to the Section 12A of the Insolvency and Bankruptcy Code.

Paltry recovery

Eyebrows had been raised at the settlement offer as public sector banks agreed to settle with the promoter of Siva Industries, a huge loan of Rs 4,863 crore at just 318 crore — recovery of only 6.5 per cent.

Lenders were even withdrawing the bankruptcy process of Siva Industries,

It was pointed out that the settlement amount accepted by banks is even lower than the liquidation value of Siva Industries — will result in loss of approximately Rs 4,700 crore public money

Instead of invoking personal guarantee of promoters, the public sector bank Canara Bank privately sold its exposure of Rs 1,148 crore to a foreign owned ARC — International Asset Reconstruction Company Private Limited (IARC).

CBI has also filed criminal case against former senior officials of IDBI Bank and Sivasankaran for allegedly defrauding the lenders to the tune of Rs 600 crore.

Other rejections

Bankruptcy experts have termed the settlement unusual, citing the rejection of such offers by promoters in the past.

The acceptance of Sivasankaran’s offer differs from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.

In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

Experts say while banks may be getting the most out of such settlement in absence of any serious bid, but such a move weakens the IBC, especially Section 29A that bars promoters from bidding for their assets in a bankruptcy court. The Siva deal, if it goes through, could set a precedent of promoters striking settlement deals with banks when there are no bidders.



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NCLT orders liquidation of Siva Industries, BFSI News, ET BFSI

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The National Company Law Tribunal (NCLT) Chennai has dismissed the C Sivasankaran application and ordered the liquidation of Siva Industries.

NCLT said that Sivasankaran application under section 12 (A) does not stand. NCLT has also dismissed the SBI application.

Siva Industries and Holdings Limited (Siva Industries) will go into liquidation after the NCLT rejected the application.

This is as per provisions of the Insolvency and Bankruptcy Code where 90 per cent of the lenders had not given approval.

Lenders of Siva Industries and Holdings Limited (Siva Industries), founded by C. Sivasankaran (the former promoter of Aircel) had filed application under Section 12A of Insolvency and Bankruptcy Code 2016 (IBC) in National Company Law Tribunal (NCLT), Chennai Bench for withdrawing the insolvency proceedings against Siva Industries.
Siva Industries and Holding owes Lenders approx Rs 5,000 crore.

The settlement

The lenders to Siva Industries had told the National Company Law Tribunal that they will get 26% of their dues after taking into account third-party guarantors. Operational creditors were to get part of their dues under the settlement plan.

The deal had raised eyebrows as such offers by promoters were rejected in the past.
On the reason why they approved the 12A petition of promoters banks had told the court that if a company is liquidated or in a resolution plan involving a third party, all operational creditors, including tax authorities, are wiped out.

Also, the IDBI Bank‘s claim of Rs 644 crore will be paid while Blackstone-backed International ARC will get an additional amount of Rs 510 crore via land sale, they had said.

Unusual deal

Bankruptcy experts had termed the settlement unusual, citing the rejection of such offers by promoters in the past.
The acceptance of Sivasankaran’s offer differed from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.
In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.



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Vodafone Idea lenders can potentially lose Rs 1.8 lakh cr if telco collapses, BFSI News, ET BFSI

Banking & Finance

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A fresh eruption in Vodafone Idea financial woes with the promoter K M Birla offering to hand over his equity to the government has worried the telco’s lenders who stare at a loss of Rs 1.8 lakh crore if the company collapses. “I am more than willing to hand over my stake in the company to any entity- public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in the letter.

A large part of the loans to the lender is in the form of guarantees with public sector banks having a lion’s share of the debt. Some private lenders with a funded exposure have already started making provisions.

The debt

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

VIL’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.

The scenario

If fails to repay its dues to the government and these guarantees are invoked, it would immediately turn into debt and would soon be classified as a non-performing asset.

The hit on PSU banks will not be as large as their exposure because in recent years lenders have been demanding a substantially higher cash margin for their guarantees. IDBI Bank is understood to have up to 40% margins for the guarantees it has extended. But even then it will be large enough to wipe out profits for many.

What ahead?

The insolvency process can work only when there are buyers. In the case of Vodafone, the Rs 53,000-crore AGR (adjusted gross revenue) dues to the Centre are a deterrent. This is despite Birla being willing to write down his entire equity. The government dues cannot be avoided as the Centre cannot make an exception for one company. Even in insolvency cases, the department of telecom has claimed its dues to be that of a financial creditor although there have been attempts to mark them as operational creditors.

The uncertainty over DoT’s claims, which is already being experienced by lenders in the Reliance Communications

insolvency case, would make telecom resolutions a challenge. Lenders do not want to risk insolvency as this

would result in the exit of customers which was the case with RCom.

With the the company’s debt obligations being equal to 1.5% of the banking sector’s credit, experts have suggested the debt be converted into equity shares, the company be nationalised and perhaps merged with BSNL and MTNL. However, it seems highly unlikely the government will nationalise the company. On balance, they would reckon it is better to give up the revenues than act politically incorrectly in bailing out a private sector player—one with a foreign promoter.



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